Alas, such a clean fix is impossible, because the $5.2 trillion figure includes much more than a cash transfer from government to businesses. By the commonsense definition of the term, governments actually subsidized fossil fuels by $296 billion in 2017, according to the report.
I’m not going to say that represents a more or less grim situation than the alternative. But it is undoubtedly a much smaller number, and it can misstate the overall problem of climate change. It’s not that someone is already paying the huge costs of fossil fuels; it’s that everyone and no one is.
Read: The fossil-fuel welfare state
Why does the IMF seem to overstate subsidies 17-fold? It comes back to its definition of subsidies. The report says they come in two flavors. First, there are pre-tax subsidies, which reflect the difference between what people pay for a fuel and what it cost to produce. This is what we usually mean when we say subsidy: Exxon might only be able to break even selling a gallon of gas for $3.50, but the government might decide that the best price for gasoline is actually $2.50. If it provisions public funds to pay this discount, then we would call the resulting $1 a subsidy.
But wait! Then the report adds that there is actually another kind of subsidy, which it calls a post-tax subsidy. This subsidy reflects the difference between “actual consumer fuel prices” and the full societal and environmental costs of a fuel.
These costs are very large: The burning of fossil fuels releases deadly air pollution, hastens the destruction of the climate, and (sometimes) increases traffic fatalities. And since all of those things kill people, they also depress a country’s tax base. Account for both the harms and the smaller tax base, says the IMF, and you produce an overwhelming number. In 2017, post-tax subsidies came to $4.9 trillion, or 94 percent of the total.
Those costs are very real. And they represent a subsidy of sorts: They are a grant of something valuable (our lungs, our home planet, our lives) to assist an enterprise deemed advantageous (the burning of fossil fuels). But they’re not entirely a grant of money to the oil companies.
They’re sort of like a grant of something valuable exchanged among ourselves: If the air pollution from my gas stove causes you to have a fatal heart attack, then I reaped most of the excess benefits of that arrangement (I didn’t have to go chop wood to cook dinner), my gas company earned a smaller share (collected via my monthly bill), and you paid for the difference. Every year, 70,000 to 107,000 Americans subsidize air pollution with their life. Of course, before you were stricken, you were on the “winning” side of that deal many times—the exact number dependent on how often you burned fossil fuels during your life.
Which sharpens the point: The burning of fossil fuels demands the grant of something valuable not from one equal to another, but from the poor to the rich, from the weak to the powerful. The wealthy can and do burn more fuels, after all. A remarkable study published this year in Proceedings of the National Academy of Sciences found that black and Hispanic Americans experience about 55 percent more air pollution than they cause. White Americans, meanwhile, suffer 17 percent less air pollution than they cause. No wonder black children are four times as likely to die from asthma as white children.